The courier, express, and postal industry is the largest segment of the transportation marketplace worldwide. This blog will provide a personal perspective on the challenges faced by firms in the industry as they serve an increasingly competitive market.

Sunday, June 26, 2011

In response to a comment on his Facebook Page, Congressman Ross clarified his position on prefunding and overpayments of retiree liability.

Doc Piper's Comment

Rep. Ross, if you truely denied the overpayment of USPS to OPM, you are intentionally lying. OPM collects it into their budget with no reguard to the overpayment. If you are an honest Representative you will admit the money paid and demand it into a trust fund, so that no taxpayer will have to supplement the USPS. But you canot deny the payment made and then refuse its return. That's a plain lie.

Congressman Ross's Response

Post #1

FERS, perhaps, but not CSRS. The prefunding requirements is in line with the number of retirees and the per person benefit cost per retiree. $11,000 per person at 500,000 retirees. The USPS IG says there is an overpayment, but the OPM denies the overpayment. I do not believe there is an overpayment into CSRS, especially since retiree numbers will continue to rise as will the obligations. As OPM correctly points out, it is easy for USPS to not want to prefund or claim an overpayment - if they are wrong, or do no prefund, and can't meet retiree benefit obligations, it isn't USPS that will go under, it is a liability of the taxpayer.

Post #2

In the end, if you eliminate taxpayer liability (which means from this day forward, no retiree cost or benefit will be backed by the taxpayer - since all current retirees are under the taxpayer umbrella), and the USPS stops prefunding, then. everyone who works for USPS today better hope their unions were telling them the truth about the financial solvency of the USPS. Because the only way you will ever eliminate prefunding, within the current failed USPS business model, is if unions and management agree to end the federal backstop.

Congressman Ross's first comment, "FERS, perhaps, but not CSRS" suggests that he would concede that there is a FERS overfunding. This is a different position than what is contained in the Issa/Ross postal reform bill. The difference needs to be clarified by Congressman Ross and Congressman Issa.

Congressman Ross's support of the OPM-IG's conclusions in the first Post over the conclusion of the USPS-IG and the Postal Regulatory Commission confirms that he supports measuring the liability in a a way that minimizes any overpayment and maximizes what the Postal Service must pay to cover its retiree liabilities. As noted in a previous post this is a position supporting the interests of the creditor over all other stakeholders. (See A Creditor's Plan for the Postal Service.)

The final sentence in Post #2, Because the only way you will ever eliminate prefunding, within the current failed USPS business model, is if unions and management agree to end the federal backstop is accurate. Given the budget challenges, the only way the Postal Service would be able to fund its retiree health benefits at the same level as United Parcel Service and other firms that offer the benefit would be if they were no longer guaranteed by the Federal Government.

However, it should be noted that future Federal budgets and legislated levels of compensation could eliminate retiree health care benefits. So it is not clear how secure retiree health benefits will be for postal or government employees who are starting a government career now right after high school or college. (The Issa/Ross bill illustrates that Congress has the power to adjust wages and benefits of postal and federal employees so that if benefits offered federal employees now are eliminated in the future, they can be eliminated for postal employees either through law or arbitration decisions.

2 comments:

Anonymous
said...

It is a little odd that the Issa/Ross bill says nothing about the FERS/CSRS overfunding. It is generally agreed that OPM followed the legal mandate as set in 1974 when calculating the pension funds, but USPS ended up spending $50-75 billion more than it should have. This money should be refunded to USPS and used to pay-off the draconian healthcare prefund requirement. Ross only needs to recognize this as the most obvious solution. The $5.5 billion yearly payment placed a burden on USPS especially when it needed fiscal flexibility. Issa/Ross obviously believe the problem would be solved with more unnecessary regulations and by halting the collective bargaining process. Perhaps Issa can be convinced to propose a $75 billion earmark payable to USPS. But then again, that may be perceived as a moral hazard. The Issa/Ross proposed bill should at least make for an entertaining reading, IMO.

The real issue is that if both overpayments were recognized, and applied to the prefunding of health benefits, then the Postal Service would become a stable, viable organization able to meet the very-significant challenges it must face. It would not be that difficult to work out the necessary chagnes that must occur with its stakeholders, over the years, as one sees how volumes and products go.

Subscribe To

Blog Author

Alan Robinson is the President of the Direct Communications Group and an associate of Analytic Business Services (AnaBus). He has over twenty years experience helping firms and government officials deal with the regulatory, policy, marketing, and management issues associated with changes in competition within transportation, parcel delivery and postal markets.
He can be reached at alan.robinson@directcomgroup.com